What the US alternative to recent trade/budget deficits and fiscal/monetary stimulus is?

The demographic/political/economic and social structural/institutional problems in western Europe or Japan versus the US?

Now that the US deficits have been realized, what the domestic and foreign
policy options are for the US?

Exactly why the deficits are a prelude to domestic crisis?

As he believes there will be a flight from the dollar, where will the money flee to?

It was evident about six months ago that there was something wrong with
Ariel Sharon. Even a casual observer of Israeli politics would have
noticed his abrupt change of stance with respect to the Palestinians; almost
schizophrenic.

Is the Sage beginning to show signs of disorientation?

He increasingly sounds like a college coed, ivory tower professor or
religious end-timer, spouting off about some personal, kumbaya,
political or social belief without consideration of practicality or logic.

I have learned over the years of watching the Sage that he sees every other being or organization on the planet as some cardboard cutout or pawn, a means to a personal goal, and nothing more.

His born-again style pontificating about the dollar and US policy is very suspect

Assuming he still has his faculties intact, I must assume he is either
concerned about mishedging at his conglomerate, or has succumbed to
political pressure to take his current stance publicly as a quid pro quo for the
government's not pursuing the nefarious maneuvers of his insurance operations.

Not a conspiracy theory; just a thought.

01/19/2006What a Card! by Victor Niederhoffer

The Sage of Nebraska gave an 11-page talk to the students of the
Harvard
Business School (HBS) on December 22, 2005. It contains one untested, detrimental, or loaded, partial but misleading
truth and shibboleth after another. The highlight occurs when he starts off by
telling how the secret of his success is buying great companies like
Nebraska Furniture Mart, and
See's
Candy. You would have thought that one of the professors or students would ask
him what the rate of return on these companies might have been, or how a company that produces or retails a product in a
declining market segment in a declining region in the most competitive of all
businesses could have an above average rate of return going forward, but no.

The audience eats up such sayings as "take care of thy shop and it will take care
of thee" and "We've bought business after business like the Mart" and
"Reading Ben Graham's book
The Intelligent Investor
is the most important
attribute that has contributed to my success" and "There is a very high
probability that a major nuclear biological or chemical incident will happen
somewhere," and "Markets everywhere follow three stages--- innovators,
imitators, and swarming incompetents (that's where the hedge funds are now)"
and "Find people you like and are capable, and things will work out" and
"Look for businesses that an idiot can run."

And they loved the Sage's explanation of why
Berkshire can do so
well: it buys businesses and leave the owners alone, and he never buys a
business at auction, and two of the five businesses he bought last year
had higher bids from private equity shops, but Berkshire has the an advantage
in buying from people who don't want to auction off their business, and how he met FlightSafety for a hamburger and cherry coke at
Skadden's offices and reached a deal in about an hour.
"You see, Al believes in producing safer pilots."

There were
dozens of these statements contained in the lecture and you would think that a
professor there would have said, "Hundreds of other conglomerates have said
that the key to their success is that they leave the companies alone. And can you really make money by buying a business that an idiot can run or is it doing something so repetitive that it doesn't have to worry about competition and
aren't these factors taken into consideration in the price? More importantly, Mr.
Sage, doesn't everything that we teach our students here say that our economy is
very competitive, and it's becoming even more competitive with increasing free
trade and free enterprise around the world and aren't the businesses that any
idiot can run that do humdrum things within everyone's sphere of competence,
the ones that are guaranteed to have the most competition, with the rate of
return on them being driven down to the risk free rate? Isn't that the lesson
that Charlie taught you? Are the returns on the humdrum businesses you bought
taking every thing into consideration before your credits with and deferrals
from the Service so different from the risk free rate of return? And, doesn't
every seller tell you that they're taking less money to sell out to you than
they could with someone else just to get you to raise the price?"

(Ninety-nine percent of the
thousands of companies that I sold or tried to sell during my 25 years in the
merger business were instructed to use this tried and true mantra of the old
maid. )

But what really is the key, the one thing that confirms my theory that
the Sage is the old snarling lion fighting to keep the younger ones from mating,
is the frequent use of the sexual allusion. Here are two samples after his
staple, "It always seems there's one dance left." The sage "used to go to
sleep counting legs but now he doesn't do it any more because it's not so good
for sleep" and "the Wall Street analyst said we could save money by your
cooking so we could fire the cook, and the wife said we could save money if you
learned to make love and we could fire the gardener."

What naive patsies they must have at HBS to let all these untested and
anti-economic theoretic statements go without challenge? Worse yet, because
Warren is so tight, and he has a great savings succession plan with his
charitable foundation, there is probably very little chance that the school
will get a major donor gift from him. All in all, a very dismal moment in the
history of investments and the integrity of the academic environment.

But it's an ill wind that blows no good, as the chronic bear would say. The fact
that people like the Sage and the Chronic and the other abelflecprudsortles
exist and spread the damaging message that has the world in its grip through their
second-hand levelers in the wholesaling-of-info game does open up some nice niches for those who believe in enterprise, can count, or read the work of the
Triumphal Trio, or those of my colleagues above.

Stefan Jovanovich remarks:

Whatever J.P. Morgan Sr.'s faults, he was never "doddering" and the
response to his remarks about "character" before the Zagora committee
were anything but approving. No one believed him. Morgan's own
opinions about Jews were equally puzzling to his contemporaries on Wall
Street. In an age where Gentiles' attitudes ranged from wariness at
best to outright paranoia, Morgan, Sr. had no fear of Jews - either
privately or in business. Many of his art dealers and "scouts" were
Jews, and there is no record of his having ever said anything
anti-Semitic. His firm did not hire Jews, but they also did not hire
Baptists or Catholics. As for the Ivy League, Morgan, Sr. was a skeptic,
not a believer. He thought Harvard had made his son into something of a
prig, and Yale was not one of his charities. (I have to check, but I do
not think that the college is mentioned in his will.)

The Sage of Omaha is a genius. So was Colonel Parker. Buffett knows
that Berkshire's valuation is not sustainable, if measured by "mere"
financial criteria, so he is busily creating a legacy that makes his
company into the ultimate "social responsibility" investment. Selling
the Berkshire Hathaway stock will become as unthinkable as doubting the
wisdom of the Kyoto Protocol (or whatever its successor will be in
virtuous certainties about our sinful world). If you want to become the
Saint of Omaha, that is the only way to go; and that is the road that
the Buffett carnival show has been traveling for the past decade.
Reading from Graham and Dodd, the "bible" of investing, is part of the
act. It is truly a masterful performance.

Prof. Gordon Haave comments:

Ultimately, HBS is a business. The business depends on customer satisfaction:

1. Good job placement after graduation, and, less importantly:
2. Being able to instill in the students a sense of superiority

Harvard is aided in both #1 and #2 by a long history of success (or at
least perceived success). However, the top 5-10 business schools are
in fierce competition to get the top ranking in U.S. News and World
Report.
Thus, on the margin, #1 and #2 are very important vis-a-vis
competition with Stanford, Wharton, Columbia, etc.

What is the last thing that a smart business manager would do in this
situation? Telling the customers that the world changes every day,
that the cycles are ever-changing, and that no amount of money or
text-book education can guarantee success.
Therefore, they all work very, very hard to get people like Buffet to
come in and make them feel special, and more importantly lead them to
believe that their book-smarts along with a few trite platitudes will
guarantee success.

This false sense of security is self-fulfilling because
self-confidence is a very important trait in hiring and promotion
decisions in most industries.
HBS, by allowing the "anti economic theoretic statements" to go
unchallenged, is thus successfully guaranteeing the success of its
business. This should come as no surprise. What is interesting is
that a man of such wealth and fame would allow himself to be a part of
the charade.

Our lives could be construed as a series of
charades. Fantasy is everything for us, we
humans. Harvard dwells in fantasy when books
and classes are waved around like patriotic
flags. For connections and prestige and
background get most Harvard grads into top
entry positions in American corporations and
in U.S. bureaucracies. It has little to do with
academic symbols and meanings.

A brother-in-law played football as a star running back for the University of Washington.
Of course Harvard wanted him. The prestige
of Harvard Law School got him a slot in a
notable legal firm as soon as he graduated.
Of course, he had brights too, not to diminish
his intellectual credibility. However, hundreds of
Harvard students have brights, but they don't have star-level football history.

Dan Grossman adds

I admire the Chair's energy and feistiness in still going after the Sage.
Do you have the accurate cite for the HBS reviews of his speech because I would love to
look at them.

I can't imagine what it is in Graham's book that he still thumbs through and finds
relevant in this day and age.

On the other hand, the Sage at HBS is sort of a ceremonial appearance like Eleanor
Roosevelt visiting Quincy House when we were there. If the Sage really had some
treasured technique, such as running the cash flow of See's or Furniture Mart
through the insurance companies so that under foreign controlled tax regulations
he could avoid taxes forever, then that is the last thing he would talk about.

It's sort of like the doddering JP Morgan saying you didn't need to look at
financials, the most important thing in lending to someone was his character,
(meaning probably that the borrower went to Yale and wasn't Jewish or anything),
and everyone nodding and saying 'how brilliant'.

9/01/2005Oil in China, by Mr. Ckin

The Sage et al., if they had a pitch book, would include their Petrochina
trade in it. They have been highlighting their purchase as a prime example
of value investing in action.

Berkshire Hathaway and all of its financial industry subsidiaries are now
being
investigated for concerns from simple "accounting irregularities" to specific fraud by numerous countries and US states, including
Australia,
Germany, Canada, Ireland, UK, New York, Virginia, and Tennessee. What
started
out as an Australian investigation ~ 4 years ago into the collapse of FAI
continues to grow, with all of the
investigations increasingly
being linked.

I don't know what to make of it as investors don't seem to care and the
financial media doesn't report it. Is it simply piling on by bureaucrats
or is
there something to be concerned about?

Even as it grows the
Sage appears to be in the calm of the eye of the storm
as an
increasing number of his employees and even protoges have their careers
extinguished.

As demonstrated by the National Journal item from Friday,
the Sage has successfully positioned himself as the press's
perfect businessman: honest and folksy and altruistic and
not at all puttin' on airs.

What's the difference between the Sage's enormous tax
code arbitrage and the Loch Ness Monster?

-- The latter is sometimes mentioned in the press.

What's the difference between the Sage's ownership of one
fifth of the Washington Post and the Protocols of the Elders
of Zion?

-- The latter is sometimes cited, albeit soto voce, by
nutters. The former is subject to a total journalistic
omerta.

Give the man credit. He's successfully ingratiated
himself with his "natural enemies" - the soak-the-rich crowd
- while turning the machinery of the modern State to his
advantage.

He hits all the right talking points: raising Social
Security taxes AND means testing, explicit class warfare,
expanding the estate tax...even creating a new system of
import certificates to control the trade deficit.

"The Republicans are out of their cotton-picking minds on
this issue," said Munger, a self-described right-wing
Republican. Social Security is "one of the most successful
things that the government has ever done."

The query was made: How could someone on
one side of a transaction be seemingly guilty of violations
of accounting and other standards while at the same time the
other side was in the dark concerning its purpose whether
"briefed " or not? The following is one possible
explanation, offered by Yishen Kuik.

Is this an accounting question or a mathematical one?

If the question is whether numbers around a transaction
sum to zero, then I suppose the question is whether the
double entry system of accounting is robust across corporate
entities, i.e., does GAAP capture the flow of "boxes and
arrows" across all parties.

Might the answer be that there are key structural
weakness that allows accounting "black holes" such that the
numbers do not always sum to zero.

Two situations that might give rise to such black holes
are

1) borders are crossed in the transaction and accounting
standards do not necessarily line up neatly across borders,
thereby taking advantage of the cover and concealment from
greater effort necessary to uncover oddities in a
transaction across two accounting regimes

2) the transaction involves GAAP insensitive entities,
which absorb the bad odors of the transaction, usually in
exchange for a share of economics. Balance sheet liposuction
of unwanted asset/liabilities by using 3% equity partners

Jan. 19, 2005

Buffett Says Dollar to Decline Further Amid Trade Gap
(Update2)

(Adds details on Spitzer investigation in 12th paragraph.)

By David Plumb
Jan. 19 (Bloomberg) -- Warren Buffett, the billionaire
investor who has bet against the U.S. dollar since 2002, said the
country's trade gap will further weaken the currency.
``Unless we have a major change in trade policies, I don't
see how the dollar avoids going down,'' Buffett, 74, said in an
interview with CNBC today. ``I don't have any idea if it's going
to be this month, next month or next year.''
The forecast suggests Buffett, who runs Berkshire Hathaway
Inc., is still wagering against the currency. Omaha, Nebraska-
based Berkshire earned $412 million in the third quarter on $20
billion of foreign currency contracts.
Buffett also said he's having a ``hard time'' finding stocks
to buy and isn't purchasing commodities. Berkshire's cash swelled
to $43 billion in the third quarter because he couldn't find many
investment opportunities.
Berkshire, which has subsidiaries selling insurance,
carpets, mobile homes and business jets, may look outside the
U.S. for investments, Buffett said. A weakening dollar threat
to accelerate inflation, he said.
``I certainly welcome the chance to buy businesses, or f
that matter stocks denominated in other currencies or busines
that make their money in other currencies,'' Buffett said. ``
would be a small plus to be in a half a dozen other countries
versus earning money in the dollar.''
Berkshire's A shares rose $295 to $86,895 in New York St
Exchange composite trading. They rose 4.3 percent last year,
compared with a 13 percent gain in the exchange's composite
index.

`Force-Feeding'

The dollar fell 21 percent against a basket of six major
currencies between 2002 and 2004 as the country imported more
than it exported and the government sold bonds to foreign
investors to fund part of its budget deficit.
It has risen 3.4 percent this month on expectations U.S.
economic growth will outpace Europe's expansion and the U.S.
Federal Reserve will raise interest rates.
``We are force-feeding dollars onto the rest of world at the
rate of close to a couple billion dollars a day,'' Buffett said.
``That's going to weigh on the dollar.''
Buffett also said Berkshire's law firm is conducting an
investigation of the company's reinsurance policies after
receiving inquiries from New York Attorney General Eliot Spitzer
and the Securities and Exchange Commission.
Spitzer and the SEC are investigating whether insurance
companies, including units of Berkshire, may have sold policies
that allowed corporate clients to mask losses. The coverage,
known as non-traditional or finite insurance, can often act as a
disguised loan, regulators said. At least seven insurers have
been subpoenaed.
``It's an industry-wide investigation,'' Buffett said.

May 7, 2004

"Berkshire is also expanding a type of insurance in which
individuals cash in their life insurance policies before they die.
For example, Berkshire and a partner paid a 79 yr. old woman this year 10 million for the rite to collect her 75
million life insurance policy upon her death, buffet said " ....
Bloomberg 5/7 reporting on his annual meeting. . This seems to me like something from
Don Quixote, where the hero of the story was too smart by half, like the amour who
didn't trust his girlfriend so asked his boyfriend to try to seduce his girl so that he could see if she
was faithful and it turned out that the boyfriend and the girl friend fell in love, and then tried to kill the original amour.
Sort of like his friendship with Gates and his 18 billion bet against the dollar.

P.S. We have the strongest company in the world in reinsurance , by some margin" Buffet said.
P.P.S. Full disclosure: Vic has his largest short individual stock position ever in
Berkshire. -- Victor Niederhoffer

One of the hardest matches I play, reminding me of my games against Sharif Kahn, is my continuing idee fixe that Warren Buffett is a
sanctimonious scoundrel, who adopts a false folk mien, who will be victimized
by adverse selection the way every other conglomerate has, whose success
has come from clever use of tax losses and float, the ownership of a very good
company (Geico), and whose views about the role of business and government
and increased taxes in a good society would lead to ruination through reduced incentives and individual freedom if they were
followed. I believe his main advice to investors, to stay out of
U.S. stocks since 1997, hold onto old faithfuls, avoid the dollar and buy good companies at a bargain price, will lead
to great relative loss to those who follow it. I believe him best understood now to be a clever parasite leeching into good
people like Gates and the founders of Google, whose every utterance is designed to
prevent younger and more productive lions from displacing him in the pack. But I
find it hard to deal with articles like those in the Sunday, May 2 Times, "Berkshire Hathaway
Millionaires Gather." To those he made rich, Buffett is Midas
and Will Rogers. One such told the Times: "As he talked,
I was convinced this guy was the smartest guy
I'd ever heard speak." And the stock has outperformed the S&P in 34 of
last 39 years. And the price has advanced from $178 in 1978 to $4,000 in 1978 to $25,000
in 1995 to $92,500 today. The least I can do is put my money where the mouth is
and short a few. -- Victor Niederhoffer

06/17/2004
Comment by Russ Sears

At the start of my actuarial career I helped "price" these
types of
"living benefits" or "viatical settlements" on life insurance.
It is a bet
against science and advancement. These "viatical companies"
often are
black or white, good or evil.
They were originally the life insurance industries
compassionate response
to the AIDS blight. Young males, often without any
dependents, suddenly
going from bright long futures, handed a death sentence. A
life company,
with such a liability on their books, can simply estimate their
present
value of the death benefits based on conservative estimated new
life
expectancy and interest rate.

Most companies make the interest
and life
expectations conservative but not completely a rip-off.
However, some
companies view the newly traumatized as easy prey, stretching
these
interest assumption and life expectation well beyond usury.
While legal
recourse is often persuaded, this is also part of the "easy
prey," as
often the original beneficiary or need for the insurance no
longer is
alive or well enough to take this course.

Yet these things are much more complex than the Nebraskan's
simple
explanation. It is not clear it is the slam dunk, he implies.
For
example, he may be paying $5 million a year in premium to keep
the policy
"in force."
Yet this business is his style, for the following reasons:

It's a bet against medical technology. I priced one of
these about 12
years ago for an AIDS patient whose doc gave him one year,
about the time
the "AIDS cocktail" came out. Last I checked he is still
alive, as we
have yet to pay out on the smaller policy he holds.

It follows his bottom feeder reputation. If the shell
shocked simply
"priced" this from a few other companies, they would probably
find a
better legitimate offer.

It is a bet against the individual spirit, knowledge on a
most
personal and fundamental level, and the will to survive.

A recent visit to a get rich quick conference in Vegas, chaired by a
man who sparked my resignation from
the Foundation for Economic Education, displayed an amusing incongruence.
All the attendees, except for a certain two, were hard core believers in hard money, gold et
al, free markets, and the kind of thing that the great
Falstaff on our list believe in (the bullies, propriety, faith, sanctity,
America first, preemptive deterrence, media liberal bias,
economic liberty ((the confiscatory state)) et al). The exact opposite on every issue of the sage of N. Yet at each session, a groundswell from the audience would emerge. "Why the Sage is bearish on the dollar, or bearish about
US equities, or appalled by ridiculous P/Es, or sees higher interest rates as a great threat et al, AND HE'S GOT A LOT OF COMMON SENSE ,WISDOM AND
SAGACITY, AND THE MONEY TO PROVE IT , so ha, I'm bearish on the us and going to buy gold, and
European assets rite now. One felt his own superfluity at such a conference.
-- Victor Niederhoffer

George Zachar adds:
I am reminded of the classic psych studies of UFO cultists,
for whom every bit of evidence was interpreted as supportive.
This also speaks to the Sage's potency as a financial meme
driver.

The Chairman of the Old
Speculators Association Gently Notes:"The least I can do is put my
money where the mouth is and short a few."
-- VN, 5/5/04, Berkshire B shares priced at $3,080."I will short the stock in your honor tomorrow." --
VN, 3/12/03, in a running correspondence with CNBC Money Editor Mark Pawlosky
regarding the Sage. Berkshire B shares close at $2,254.

Stocks can be hoodoos, too. Years ago I fell in love with
Great
Basins Petroleum, an American Exchange stock, now defunct.
Generally traded around 2-1/8 to 2-3/8. After following it for
2 years I saw that it would periodically drop to 1-3/4, only
to jump back to 2-3/8 several months later. It appeared to be
an opportunity to pick up some free money. Only problem was
every time I bought it at 1-3/4 it subsequently went down to
1-1/4 or 1-3/8 and rest there until, losing patience, I would
bail (needless to say, it would begin its rebound within days
of my sale).

I gave it up as a sucker's game, but continued to watch it.
Sure enough, it re-established the pattern of dipping to 1-3/4
and bouncing back to 2-3/8 (or sometimes 2-5/8...oil stocks
were hot at the time). So I attempted to play the game
again...with the same pathetic results.
A number of years later, in an example that there is a cruel
version of serendipity, I came across a news item that Great
Basins was being bought out for $13 a share.
I never made a nickel on the stock and, in relation to my
investible funds, lost substantially. Yet I still remember the
stock fondly (in fact, there's a gold company named Great
Basins and I've been tempted to buy it figuring, irrationally,
that the name owes me something).

My assessment of GBR (for that was its symbol) wasn't
incorrect. But I wanted to be a sometime lover and not a
committed companion. Not all mistresses are capricious; some
demand nothing more than constancy. Others, like the current
equity in question, defy rational consideration and will do
you
in over and over again.
Deride the man if you will, but his stock may be one of those
hoodoos that will bring you down time and time again. -- Jack
Tierney, Chairman, Old Speculators Association.

05/05/2004
Addendum from Mr. Subway:

Incidentally, I find Buffett to be pretty disingenuous
when it comes to his recent comments on hedge funds as
a "fad":

his first 15 years of investing were in his hedge
fund vehicle.

his use of PIPES in recent years (a typical hedge
fund strategy) has been his primary mechanism for
making equity investments (see his investments in LVLT,
AMZN, DYN).

his recent claim (1998) that he could make 50% a
year doing arbitrage makes me think that he's upset
that space has gotten a bit more crowded.

his investment in West End Capital, a fixed income
arb hedge fund run by his buddy's son.

his global macro approach recently (Silver,
currencies)

Not to mention that there is only 750M in hedge funds
as opposed to 8T in mutual funds (that are all
correlated to each other, unlike the hedge fund
universe) so not sure what he means really by a "fad"
(or what his protege Seth Klarman means when he says
there is a "hedge fund bubble").
--James Altucher

05/02/2004
The Myth of the Eternal Alpha:

Please think on this. Yesterday, we are told of a
certain big-time
player: " It was
rumored that at one point in time, his aggregate trading
volume was the largest on the NYSE."
Was successful following an "eternal alpha" strategy. That is,
hold the
winners, even add on an sell the losers. This is of course a
"momentum"
strategy.

When does this give you the best return?
Of course it is
when prices are
accelerating. Why are prices accelerating? Because a big-time
buyer has
stepped in. The supply and demand is now unstable, because he
is buying.

Reading between the lines, I would hazard
a guess
that TA's
or speculators mistook this "mythical alpha" for momentum, and jumped in
unaware it had one big-time player and all the new "buyers"
suckered in.
Convinced by this phantom alpha that they have missed
something,
fundamental value. Then "big-time" walks away.

May I suggest that stocks do not behave this way unless
tortured to do so.
That for us mere mortals, a better strategy generally is more
a tactical
asset allocation, that is move to sectors/ markets that underperform,
out of sector/markets that overperform. Common sense tells us
to
"rebalance" our portfolio. For alpha is not eternal. A
company "true
value" must have some period of underperformance, because
their
underlying products cannot always be more and more in demand!!
Was not
this the fuel that set the tech bubble on fire, that they were
not
susceptible to a economic cycle?

Now instead of days, turn this to years and add Buffett's
name. But you
tell me, how has he "suckered" enough buy side players when he
walks away,
to cover this liquidation in days, this momentum he has
created over
years and years of drying up the float. The legend will
die, it will
not be pretty. Though I am but a student, I would suggest that
Vic maybe fighting the media again, a hopeless battle, until
Buffett's literal death. -- Russell Sears.

The Sage likes to talk his positions up. And he now has $15
billion + significant adding to his bearish dollar position.
But the market likes to take away money from whoever has a
position one way or the other. And Buffet's reasons for being
bearish the dollar, the twin deficits et al., show no
understanding of economics because for every dollar of current
account there is a surplus on long-term
account and it's just as reasonable to say that foreigners have
to finance their desired purchases of us investments because
the environment so good, with selling us more goods. His
position of course goes along with his acting as adviser to
Kerry on increasing taxes, which could have been predicted
based on my theory that old lions fractiously snarl around the
outer fringes of the pack as they are displaced by more virile
younger, and also by all the gratuitous anti-free market
references that pepper his every utterance.

I believe that the Sage hasn't read an economics book in many
years so everything he relies on is gut and native shrewdness
as well as guidance from fellow travelers. All things
considered, I anticipate that he will make a huge contribution
to the muse of markets in this dollar position.

In line with the grotesque obsequiousness that the media treat
his every utterance it was interesting to see how they handled
the query about whether it would be better to place experienced
managers on his board rather than the son and wife. I feel a
special kinship with the son since he is chair of the company I
sold to Dekalb Foods. And two good brothers, the Zimmers, are
now gone with the wind in the beforemath. But in response to the
critique the answer was (Charlie speaking): " I know the
Buffett family. You should be so lucky to have a family like
that." Who else could get away with this?
-- Victor
Niederhoffer

5/11/2004'It's Not His Normal Area of
Competence'

(Comment from fund manager with Berkshire Hathaway
shares after Warren Buffett, 73, lost $600 million in the first five weeks
of the second quarter on an $18 billion bet against the dollar.)

5/24/2004
The Sage
on Taxes

George Zachar draws our attention to a paragraph buried
in a WSJ piece on Buffalo and Bangalore:

"In 2003, insurer Geico was looking for a location for a new
2,500-person call center. India wasn't in the running. The
firm sells expensive insurance policies over the phone, which
even Americans have a hard time understanding. It helped that
Warren Buffett, whose Berkshire Hathaway Inc. owns both Geico
and the Buffalo News, was a Buffalo booster...Mr. Buffett says
he didn't direct Geico to choose the city; Buffalo had to sell
itself....After New York state came through with tax
incentives and training grants, Buffalo won the
competition."

Emphasis added.

At least it is now perfectly clear why the Sage, who of course
is not a New York State resident, is happy to insist that
others
pay higher taxes.

What Fools These Mortals Be, a Cynical View by George Zachar:
Fed. Gov. Bernanke, who is on most short lists to
replace Greenspan when *that* chair retires no later than Jan 31, 2006,
gave a revealing speech yesterday.

Money quotes, for those who missed them:

"...by leading market participants to anticipate that changes in the policy
rate will be followed by further changes in the same direction, policy gradualism
may increase the ability of the Fed to affect long-term rates and thus influence
economic behavior...."

"...In part because of the FOMC's communication strategy, which has linked
future rate changes to the levels of inflation and resource utilization, and in part
because of the gradualist policies that the FOMC has pursued in the past, markets
have responded to recent data on payrolls, spending, and inflation by bringing forward
a considerable amount of future policy tightening into current financial conditions.
Notably, in the past few months, long-term interest rates have risen 100 basis points
or more, equity markets have been subdued despite robust earnings reports, and the dollar
has strengthened. These developments--the sort of "front-loading" of monetary tightening
predicted by our analysis of gradualism--will reduce the financial impetus being provided
to the economy and thus provide some check to nascent inflationary pressures..."

"...because of the impact of private-sector expectations about policy on current
long-term rates, a significant portion of the financial adjustment associated with the
tightening cycle may already be behind us."

We now have one of the half dozen or so most powerful govt economic officials *on the
record* admitting he believes his job is to set asset prices...and sort of congratulating
us private sector types for "getting the joke" and repricing things in line with what he
deems appropriate.

As a reward, he, at the very very end, drops a hint that maybe we did such a good job,
the boys and girls on Constitution Avenue won't raise the cost of capital a whole bunch.

Every now and then, I fret that perhaps I am too cynical. Then I realize one can almost
never be cynicalenough.
--George Zachar